How to Make Money from Real Estate

So many reports are currently about how attractive the Philippine property market is. Different developers have been constructing more and more residential and commercial infrastructures to accommodate the growing demand for them. For example, Phinma Properties experienced condominium sales of 51% higher than the industry average for every month of 2014.

Real Estate Investment
Real Estate Investment

Online real estate marketplace Lamudi grew to more than 90,000 listings since their arrival in February 2014. Investing in real estate is not simply the latest trend. According to the International Monetary Fund, 70 percent of world growth is forecasted to come from emerging markets in the next coming years, and they foresee significant economic development, particularly in the technology and real estate sectors. Buying properties is lucrative and long-lasting. They can be means to a sustainable income, but since real estate is a multifaceted business, not many people know how. There are four ways:

  • Build and Sell. The Build and Sell Scheme was developed by private individuals. Simplified, this is building a house, apartment, condominium, or commercial infrastructure with the overall goal and selling it upon its completion. Might seem simple enough, but it is actually the riskiest way to make money from real estate. It requires highly strategic thinking in terms of location and what the future buyer’s needs and wants are. It requires dedication, putti ng a lot of money and resources down before making a profit, and time. Build and Sell developer should fully understand what the current market demand is.
  • Buy to Rent. One buys property for the purpose of renting it out to someone else. In this money-making scheme the property type must first and foremost be attractive to would-be renters. A condominium for example, does not necessarily have to be fully furnished, but it should be ideally located. Also, the cost of monthly operations, such as utilities, maintenance, and extraneous fees) must never be greater than the cost of the monthly rent.
  • Property flipping is also known as the Buying-Renovating-Selling Scheme. You buy a house, renovate it, and put in back on the property market for sale. As a rule of thumb, a property must not take more than 30 days to refurbish. Time is the most important aspect in this scheme, and the more time it takes for you to renovate a house, the more you are putting your investment at risk.
  • Buy and Hold. Land is the most common property type that is bought and then put on hold.

What one is after in this money-making scheme is a property’s value increase over time. Buy and Hold is when you buy property and only sell it after some time when its net price has increased. The risk here however, is the possibility that your property might depreciate instead of the other way around. This is because investments like this are dependent of several factors: location, demand, size, and the market’s stage at the Property Cycle (Philippine Property Cycle Report).